Thought Leadership Forum - Privatisation & sustainable development

Barely a few weeks after the Karachi Electric Supply Company (KESC) got heavily criticised for its privatisation by the SPDI, it had the SBP ex-governor and the IBA Dean and Director, Dr Ishrat Hussain speaking for privatisation and how essential it is to foster development on a sustainable basis.

KESC launched a platform, Thought Leadership Forum, aimed at addressing key issues in the country and Impact of Privatisation on sustainable development was fittingly chosen as the topic on the 99th anniversary of the power utility company.

Dr Ishrat Hussain is not one to mince words and he was quite candid with his views. Expectedly and quite rightly, Hussain argued in favour of privatising the government owned entities and to support the argument he cited the success stories of banks, telecom sector and of course KESC.

Theoretically, Hussains arguments made perfect sense, as he touched upon why running businesses is not the governments job and that the private sector should be allowed to run the show, just as the markets should be allowed to set prices.

The banking reforms that led to privatisation of large banks was a success story that the IBA Dean so fondly talked about, as it has saved billions of rupees of the taxpayers money which was being used to bail out the then government owned banks.

The liberalisation of the telecommunication sector was also used as a reference point, as to how it resulted in benefitting tens of millions of consumers in the country and how it broke the government monopoly, bringing competition and foreign investment in Pakistan.

While Hussain remains in favour of all things to be privatised, he believes in certain preconditions to be met, without which the privatisation process can never yield the desired results. The presence of an efficient and competent regulator is a prerequisite for privatisation in Hussains views, which surely is of utmost importance.

That said, comparing the privatisation of banks to that of the power sector is not exactly an apples to apples comparison. Firstly the large banks operated in a competitive environment, whereas the KESC was and continues to be a monopoly. Monopolies are lions that mark their territories, while the banks, operating in a competitive environment are closer to horses that must gallop to stay ahead in the race.

Moreover, even after the privatisation of KESC, the government did not facilitate KESC when it opted for downsizing. This was not the case with the banking sector, where downsizing was done pre-privatisation and the government rather facilitated through World Bank and other associations aid.

Hussain rightly stressed the need for a competent regulator for privatised companies, and for preparing ailing public sector entities for privatisation. The case of Pakistan Steel Mills is a classic example of an incompetent regulator, politicised culture and a company not ready for private ownership.